Surprise drop in new home sales

Surprise drop in new home sales

Sales of newly constructed homes fell 3.6% in September, after five months of gains, according to a government report.

NEW YORK (CNNMoney.com) -- Sales of newly built homes fell unexpectedly in September after rising for five straight months, according to government figures released Wednesday.

The Commerce Department said new home sales fell 3.6% to a seasonally-adjusted annual rate of 402,000 last month, from a downwardly revised rate of 417,000 in August. It was the first time new home sales declined since March.

Economists surveyed by Briefing.com had expected September new home sales to rise to a rate of 440,000 units.

"We're attributing most of the decline to the potential expiration of the new home-buyer tax credit," said Adam York, an economist at Wells Fargo.

In addition to relatively low prices and attractive mortgage rates, the housing market has been supported in recent months by a temporary government tax credit for first-time homebuyers.

The credit, which can be worth up to $8,000 for eligible buyers, is set to expire at the end of November. Congress is expected to extend the credit, but the terms are still being debated.

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Wednesday's report showed the median sales price rose to $204,800 in September from $195,200 the month before. The average sales price was $282,600.

The estimated number of new homes for sale at the end of last month was a seasonally adjusted 251,000, according to the Commerce Department. Last month, it was 262,000 unsold homes.

At the current sales pace, it would take 7.5 months to sell through that inventory, according to the report. That's up from the previous month, when the there was about 7.3 months of inventory on the market.

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